"Finprofit" credit rating by. BB +

Rating agency “BIK Ratings” awarded LLC "Finprofit" credit rating at by. BB + (outlook uncertain), which characterizes a moderately risky level of creditworthiness. According to BIK Ratings, LLC "Finprofit" in the short term will ensure the timely fulfillment of all current financial obligations arising in the course of its activities. The possibility of financial hardship in the event of liabilities requiring significant lump-sum payments is estimated to be above average.

It should be noted that when assigning a credit rating in accordance with the current methodology, an additional modifier was used, which reduced the final rating from BBB to BB +, which is caused by a high degree of uncertainty in the current macroeconomic environment and a decrease in the credit rating of the region by leading international rating agencies. The management of LLC Finprofit has set clear plans for further development, however, at the same time; the company does not have a separate marketing strategy reflected in internal documents, which can also increase the risks of the organization. In addition, the company is actively affected by external destabilizing factors that affect both the development of the entire leasing market and the microeconomics and business environment of the organization, including the level of consumer demand in the short term. If the business factors under consideration stabilize during the year, the credit rating may be revised upwards.

LLC "Finprofit" specializes in providing financial leasing services for agricultural machinery, furniture, computer and household appliances, vehicles for individuals in the domestic market of the Republic of Belarus.

At the end of 2021, the volume of the Organization's leasing portfolio amounted to 8.2 million BYN, of which 89.9% is for individuals, the portfolio is formed by 4,680 contracts, 98.0% of which are for individuals. The volume of new leasing agreements at the end of 2021 amounted to 10.0 million BYN, of which 93% is for individuals, the volume of new business is 8.4 million BYN, of which 93% is for individuals. According to the financial statements, the assets of LLC Finprofit as of January 1, 2022 amounted to 13.9 million BYN, equity - 1.1 million BYN. Revenue net of taxes from revenue in 2021 amounted to 1.8 million BYN, net profit – 0.7 million BYN. The average number of employees of Finprofit LLC at the end of 2021 was 12 people.

Financial stability

Cash flow adequacy ratios to repay the total debt in 2019-2021 evaluated by BIK Ratings at a high level. The ratio of FFO to debt at the end of 2021 is 0.64x, CFO to debt - 0.66x, FCF to debt - 0.05x. Indicators of the adequacy of cash flows to repay the short-term part of long-term liabilities are assessed by BIK Ratings are also at a high level. At the end of 2021, the ratio of CFO to short-term debt is 4.42x, FCF to short-term debt is 0.30x.

The ratio of the weighted average term to maturity of the leasing portfolio to the weighted average term to maturity of the debt at the end of 2021 was 0.52 and reflects the optimal balance of terms and, as a result, the low probability of losses due to the need for early repayment of the debt, or the occurrence of overdue debt on lease payments.

Capital structure ratios in 2019-2021 demonstrate a high dependence of the organization on borrowed capital. At the end of 2021, the autonomy ratio adjusted for quasi -capital and quasi- reserves amounted to 0.06, the financial leverage ratio - 11.65); The company's currency risk in the current activity of leasing property is assessed as high; however, taking into account investments in foreign currency bonds of the Ministry of Finance of the Republic of Belarus, it is moderate.

At the ends of 2019-2021 from 9% to 21% of the leasing organization’s receivables are accounted for by agreements with a currency clause, including 9% at the end of 2021. Contracts with a currency clause are concluded in relation to USD and EUR, including USD as the prevailing foreign currency. 100% of long-term financial investments are government long-term bonds in USD.

The share of foreign currency debt in 2019-2021 varies from 49% to 63%. The organization has foreign exchange liabilities in USD and EUR, the predominant foreign currency is USD.

At the end of 2021, the ratio of income under agreements with a foreign exchange clause to foreign exchange obligations of the period was 0.42; the ratio of lease payments due under agreements with a foreign exchange clause to foreign exchange debt was 0.12. The ratio of income under contracts with a currency clause and proceeds from financial investments to foreign currency liabilities of the period amounted to 0.64, the ratio of lease payments due under contracts with a currency clause and the book value of financial investments to foreign currency debt was 0.97.

Liquidity of short-term assets

Liquidity of the Company's short-term assets in 2019-2021 rated as low. The overall liquidity ratio adjusted for overdue debt under leasing agreements as of 01/01/2022 was 3.23, which is significantly higher than the industry average. However, the high liquidity ratio is only 0.02, which is significantly lower than the industry average.

Profitability of activities

BIK Ratings evaluates the profitability of Finprofit LLC in 2019-2021 as excellent. Thus, according to the agency’s calculations, at the end of 2021, the operating margin on net profit amounted to 40.8%. Return on equity in 2021 was 73.8%. Return on assets in 2021 was 5.9%.

Dependence on lessees

The share of the 3 largest clients of the organization in the total volume of its leasing portfolio is 8.2%, which indicates a low level of dependence of the Organization on lessees. The key lessees are organization No. 1 operating in the field of utilities (6% of the leasing portfolio), organization No. 2 operating in the field of building materials (1%), and an organization operating in the transport and logistics sector (1%).

The degree of diversification of the leasing portfolio with legal entities

The organization's leasing portfolio includes lessees (legal entities) from 6 sectors (industries) of the economy, which indicates a relatively high level of leasing portfolio diversification. These are mainly trade, transport and manufacturing organizations.

New business growth rate and competitive position

The growth rate of new business of the Organization is by 17 points above the industry average, while the share of the rating object in relation to the total leasing portfolio of leasing organizations in the country is less than 1%.

The quality of the leasing portfolio and the management of distressed advances to suppliers of leasing property

LLC Finprofit does not have distressed advances to suppliers of leased property, while the volume of distressed assets is 7%, which does not allow us to classify the organization as highly competitive in this factor.

The level of advance payment for new business and the security of transactions

The level of advances for new business is below 1%, which characterizes this factor as critical. At the same time, less than 1% of the leasing portfolio is secured by guarantees/sureties.

Funding structure

Funding structure in 2019-2021 BIK Ratings evaluates as good. This assessment is due to the high diversification of both forms of funding (at least four (credits, loans, tokens, bonds), where the share of one form is no more than 38-51%) and lenders/lenders (the share of one largest lender/lender is no more than 30 -34%, the share of the three largest lenders/lenders is no more than 37-68% with a tendency to decrease in concentration).

Insurance protection

The share of the largest insurance company in the total sum insured exceeds 90%, and the share of insured assets in the total assets is 14%, which characterizes the insufficient level of insurance coverage of the company.

Business reputation and credit history

The organization has a positive score on most of the sub- factors that characterize its business reputation and credit history.